New Zealand Monetary Policy

New Zealand

New Zealand: Central Bank stays put again in April; expects to maintain stimulatory monetary policy

April 30, 2015

At its 30 April monetary policy meeting, the Reserve Bank of New Zealand (RBNZ) kept the official cash rate (OCR) unchanged at 3.50%. This is the sixth time that the RBNZ has kept the rate on hold following four consecutive rate hikes.

Regarding the international environment, the Central Bank noted that even though New Zealand’s main trading partners are currently growing at their respective long-term averages, they remain dependent on accommodative monetary policy, especially in the Euro area. The Bank mentioned that, “considerable uncertainties exist in Europe, China and Australia, and on the timing of US monetary policy adjustment, although global growth should be boosted by the decline in world oil prices.”

The Central Bank mentioned that New Zealand’s economy is continuing to grow at around 3.0% per year, resulting from the low oil price, high net immigration and construction activity as well as supportive monetary policy. Nevertheless, according to the RBNZ, a number of factors are weighing on the growth outlook including, fiscal consolidation efforts, lower dairy incomes and the high New Zealand dollar. The Central Bank again pointed out that the exchange rate is, “unjustifiably high and unsustainable.”

The Central Bank expects inflation to remain subdued throughout this year as a result of the high exchange rate, low international inflation and weak global oil prices. The RBNZ foresees inflation picking up gradually in the medium term. Moreover, the RBNZ noted that it, “expects to keep monetary policy stimulatory, and is not currently considering any increase in interest rates.”

The RBNZ suggested that future adjustments in the OCR would depend of the evolution of inflationary pressures, highlighting that, “[i]t would be appropriate to lower the OCR if demand weakens, and wage and price-setting outcomes settle at levels lower than is consistent with the inflation target.” The next monetary policy meeting is scheduled for 11 June.

FocusEconomics panelists expect that the OCR will end this year at 3.49%. For 2016, participants see the interest rate ending the year at 3.80%.


Author:, Economist

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New Zealand Monetary Policy Chart


New Zealand Monetary Policy April 2015 0

Note: Official Cash Rate (OCR) in %.
Source: Reserve Bank of New Zealand.


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